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THE FEDERAL CONSTITUTION & THE LEGAL FRAMEWORK

THE FEDERAL CONSTITUTION & THE LEGAL FRAMEWORK. Prepared By: Ms. Narimah Hashim Jabatan Perakaunan & Kewangan Fakulti Ekonomi & Pengurusan, UPM. THE FEDERAL CONSTITUTION. Definitions, features & functions Relationship of the government & the Constitution

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THE FEDERAL CONSTITUTION & THE LEGAL FRAMEWORK

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  1. THE FEDERAL CONSTITUTION & THE LEGAL FRAMEWORK Prepared By: Ms. Narimah Hashim Jabatan Perakaunan & Kewangan Fakulti Ekonomi & Pengurusan, UPM NHashim....UPM...12.7.2006

  2. THE FEDERAL CONSTITUTION • Definitions, features & functions • Relationship of the government & the Constitution • Financial relationship between Federal & State Governments • Government grants • Financial difficulties of States NHashim....UPM...12.7.2006

  3. WHAT IS THE FEDERAL CONSTITUTION? • The Federal Constitution of Malaysia is the SUPREME LAW of the nation that distributes the power of governance in accordance with the practice of a Parliamentary Democracy and a Constitutional Monarchy • It contains 181 Articles NHashim....UPM...12.7.2006

  4. THE HISTORICAL BACKGROUND • The basis of The Federal Constitution of Malaysia is the Constitution of the Federation of Malaya • It was drafted by a Working Committee set up by the British Government called the Reid Commission. • Lord Reid from the United Kingdom presided over the committee with representatives from their side, advisers from the Conference of Rulers & Malayan political leaders NHashim....UPM...12.7.2006

  5. THE HISTORICAL BACKGROUND • The Reid Commission sought & consulted the views of political parties, non-political organizations & individuals on the form of government and racial structure appropriate for the country • In the process, a MEMORANDUM from the ALLIANCE GROUP had gained precedence NHashim....UPM...12.7.2006

  6. THE MEMORANDUM? • “…. is an inter-communal conciliation aimed at mutual interests & strengthening the nation’s democratic system of government which took into account 5 main factors namely the positions of the Malay Rulers, Islam as the official religion of the Federation, the position of the Malay language, the special rights of the Malays & equal citizenship” NHashim....UPM...12.7.2006

  7. EFFECTIVE DATE • The Constitution of the Federation of Malaya commenced on the date of our country’s Independence on August 31, 1957 NHashim....UPM...12.7.2006

  8. THE CONSTITUTION • Forms the basis of other laws of the country • However, NO other law should contradicts the laws stipulated in the Constitution • If any law passed after the Independence Day inconsistent with the Federal Constitution, it will be NULL and VOID NHashim....UPM...12.7.2006

  9. AMENDMENTS TO THE CONSTITUTION • No other body(s) could amend any of the laws in the Constitution except THE PARLIAMENT • Any amendments to the Constitution requires a TWO THIRD MAJORITY from both houses • Any amendments must first passed through the Cabinet, before it is brought to Parliament, • To date as of 2005, there have been 42 amendments over 48 years since Independence NHashim....UPM...12.7.2006

  10. AMENDMENTS WITH EXCEPTION • However, amendments to the powers of the Sultans & their respective status (Article 181), status of Islam in the Federation (Article 121) , the status & rights of Bumiputras (Article 153), the status of the Malay language as the official language (Article 152) etc, require the ASSENT of the CONFERENCE OF RULERS NHashim....UPM...12.7.2006

  11. AFTER THE FORMATION OF MALAYSIA • The formation of Malaysia was initiated by the former PM Tunku Abdul Rahman Putra Al-Haj in 1961 • The State of Borneo & Brunei were invited to form Malaysia but Indonesia & the Philippines objected • In 1963, Malaysia was formed without Brunei • The Federal Constitution was amended to allow for the entry of Sabah & Sarawak into the Federation of Malaya • The Constitution became known as the FEDERAL CONSTITUTION OF MALAYSIA NHashim....UPM...12.7.2006

  12. CONCEPTS & DEFINITIONS • ACTS = are laws passed by Parliament • ENACTMENTS = are laws passed by the State Legislative Council • ORDINANCE = are laws passed before Independence including laws passed in Sabah & Sarawak • For ENACTMENTS & ORDINANCE ONLY a simple majority is needed to amend the law NHashim....UPM...12.7.2006

  13. FEATURES OF THE CONSTITUTION • Determines the structure & responsibilities of Government institutions including Parliament, Senate, House of Representatives & the powers of the Legislature, Executive & Judiciary • Determine the distribution of power among various Government bodies NHashim....UPM...12.7.2006

  14. FEATURES OF THE CONSTITUTION • Provides the general principles on the execution of Government powers • Provides for rules & laws governing the country • Provides Malaysia as a Federation having the following distinct features: • Malaysia has a Constitutional Monarchy • Malaysia practices Parliamentary Democracy NHashim....UPM...12.7.2006

  15. THE CONSTITUTIONAL MONARCHY • The Constitution provided for the institutions of the Yang Di-Pertuan Agong, the Paramount Ruler, the hereditary rulers of the nine states and the Council of Malay Rulers. • HRH The Yang di-Pertuan Agung has the power to safeguard the customs and traditions of the Malay people and the administration of the Islamic Religion in each state. NHashim....UPM...12.7.2006

  16. CONSTITUTIONAL MONARCHY • HRH The Yang Di-Pertuan Agong is the Head of the Islamic Religion for the states of Pulau Pinang, Sabah, Sarawak and the Federal Territories. • HRH The Yang Di-Pertuan Agong is also the Paramount Ruler of the country, and • HRH is the Highest Commander of the Armed Forces NHashim....UPM...12.7.2006

  17. CONSTITUTIONAL MONARCHY • However, HRH carries out his duties under the Constitution under the advice of the Prime Minister and the cabinet ministers. • Meanwhile, the hereditary rulers are Head of State of his own state and carry out their duties under the advice of their own Minister or Menteri Besar or Chief Minister NHashim....UPM...12.7.2006

  18. PARLIAMENTARY DEMOCRACY • Malaysia practices Parliamentary Democracy with Constitutional Monarchy and HRH as the Paramount Ruler • The Federal Constitution was written with the setting up of conditions with this system to exist. NHashim....UPM...12.7.2006

  19. PARLIAMENTARY DEMOCRACY • One of the conditions of Parliamentary Democracy is the division of administration power into 3 parts, i.e the Legislative, the Judiciary & the Executive • There shall be a general election every 5 years to elect members of the Parliament NHashim....UPM...12.7.2006

  20. FEDERATION SYSTEM VERSUS PARLIAMENTARY DEMOCRACY • Malaysia also practices a system of Democracy based on the Federation system • In accordance with this, all the states, Perlis, Kedah, Pulau Pinang, Perak, Selangor, Negeri Sembilan, Melaka, Johore, Trengganu, Kelantan, Sabah & Sarawak have agreed to the concept of the formation of the country of Malaysia NHashim....UPM...12.7.2006

  21. FEDERATION SYSTEM VERSUS PARLIAMENTARY DEMOCRACY • Each states has surrendered part of its power, such as financial, defense, education, foreign affairs, as stated by the Federal Constitution of Malaysia, to be administered by the Central Government • There are matters that are under the power of the state and each state administers the power over those matters NHashim....UPM...12.7.2006

  22. FINANCIAL RELATIONSHIP BETWEEN FEDERAL STATE & LOCAL GOVERNMENTS • The financial provision in Article 96 to 112 of the Constitution provides for the financial relationship between three tiers of governance • There are 17 articles in the provisions which act as the basis for managing the financial aspects of the Government • These provisions have been in effect even before Independence & proven to be flexible & capable of coping with changes over time NHashim....UPM...12.7.2006

  23. OBJECTIVES OF THE FINANCIAL PROVISIONS • To establish the general framework for the control of public expenditures by legislators • To form the general requirement of a good financial management system for the Government • To govern the methods for public funds to be administered & accounted for • To provide the division of various revenues of Federal & State Governments NHashim....UPM...12.7.2006

  24. OBJECTIVES OF THE FINANCIAL PROVISIONS • To define the borrowing powers of Federal & State Governments • As a requirement to maintain specified Consolidated Funds by Federal & State Governments • To specify basic principles of government finance • As a requirement for the preparation of the annual budget & statements of assets & liabilities NHashim....UPM...12.7.2006

  25. Background Information • The management & administration of the financial aspect of the Government has become the center point for an efficient & successful nation • Financial performance is a measure of the ability of the elected Government in fulfilling the objectives, vision & mission of the country NHashim....UPM...12.7.2006

  26. Public Sector Accounting System • In Malaysia, the PSA system has been designed to comply with the Federal Constitution, other statutory & legal requirements of the nation & to meet its social obligations • The purposes for which public has been received & expended must be clearly stated • The executive authorities responsible for the custody & use of public funds must be identified NHashim....UPM...12.7.2006

  27. Government Financial Systems & Procedures • Can be divided into 2 categories: • Financial Procedures, & • Non-financial Procedures • The financial procedures are those related to the finance & accounting of public funds & stores • The non-financial procedures are on other aspects NHashim....UPM...12.7.2006

  28. The Bases for Government Financial Systems & Procedures • The Federal Constitution provides the framework from which the Financial Procedure Act 1957 has the power to enact • The Audit Act 1957 provides the provisions for the audit of Government accounts at Federal, State & Local Levels • The Treasury Circulars are the new rules introduced from time to time • The Treasury Instructions are those rules that are approved & documented NHashim....UPM...12.7.2006

  29. GOVERNMENT REVENUES • Can be categorized into 2: • Federal Government Revenue • State Government Revenue • Article 96 of the Federal Constitution states that: • “No tax or rate shall be levied by or for the purpose of the Federation except by or under the authority of the Federal law” NHashim....UPM...12.7.2006

  30. FEDERAL GOVERNMENT REVENUES • This means that all proceeds of revenue are due to the Federal Government except those that are assigned to the States under Article 110 (1) of the Federal Constitution • “…each of the States shall receive all the proceeds from the taxes, fees & other sources of revenue (13 sources listed in Part 3 of the Tenth Schedule) collected, levied or raised within the State “ NHashim....UPM...12.7.2006

  31. STATE GOVERNMENT REVENUES • Article 110 (3) states that : • “Each State shall receive 10% or such greater amount of the export duty on tin produced in the State” • Article 110(3A) states that: • “A proportion of export duty on minerals meaning mineral ores, metal & mineral oils (other than tin) produced in the State shall be received by the State” NHashim....UPM...12.7.2006

  32. FEDERAL GOVERNMENT ASSISTANCE • Although the Federal Government revenues are greater in terms of amount & sources than State Governments, the State Governments receive annual financial assistance in terms of GRANTS from the Federal Government NHashim....UPM...12.7.2006

  33. ARTICLE 9 – 3 CATEGORIES OF GRANTS • States that the Federal Government shall make to each State with respect to each financial year mandatory grants example a capitation grant & a State road grant, and • Specific grants as provided by various act of Parliament, and • Supplementary grants payable after consultation with the National Finance Council NHashim....UPM...12.7.2006

  34. TYPES OF FEDERAL GRANTS • THE CAPITATION GRANTS • Is payable by virtue of Article 109(1) (a) of the Federal Constitution. • The purpose is to assist the States with the operating expenditure • The amount provided is based on the population of a particular State NHashim....UPM...12.7.2006

  35. SECTION 1 PART 1 OF THE TENTH SCHEDULE • States that the amount to be provided shall be computed according to the following rates: • For the first 100,000 persons at the rate of RM72.00 per person • For the next 500,000 persons at the rate of rM10.20 per person • For the next 500,000 persons at the rate of RM 10.20 per persons, & • For all the remaining, at the rate of RM 11.40 per person NHashim....UPM...12.7.2006

  36. AMOUNT PAYABLE TO STATE • Shall be based on the annual population projections of the State as determined by the Federal Government and calculated as per the last population census • Provided that if the last census was taken one year before the beginning of the financial year, the grant for that particular year shall be based on the population as determined by that population census NHashim....UPM...12.7.2006

  37. ARTICLE 109(2) • States that the Capitation Grant rates can be changed but if it is reduced, the reduction should not result in the State getting lesser than 90% of the Capitation grant that it has received in the previous year NHashim....UPM...12.7.2006

  38. STATE ROAD GRANT • This is given for the purposes of maintaining all roads in the State • This provision is stated in Article 109(1) (b) of the Federal Constitution • The calculation of the amount is stated in Section 2, part 11 of the Tenth Schedule of the Federal Constitution NHashim....UPM...12.7.2006

  39. AMOUNT PAYABLE FOR STATE ROAD GRANT • It shall be calculated in respect of each financial year by multiplying: • The average cost per State of maintaining a mile of State road at a minimum standard determined for State roads in those States by the Federal Government after consultation with the National Finance Council NHashim....UPM...12.7.2006

  40. STATE ROADS DEFINED • As per Section 5, Part 11 of the Tenth Schedule of Article 109 of the Federal Constitution • ‘State roads’ means any public road other than Federal roads that the public has access to. NHashim....UPM...12.7.2006

  41. MAINTENANCE DEFINED • ‘Maintenance’ means the preservation, upkeep & restoration of State roads, roadside furniture, bridges, viaducts or culverts (pembentungan) forming part thereof or connected therewith as nearly as possible in their condition as constructed or as subsequently improved. NHashim....UPM...12.7.2006

  42. STATE ROAD GRANTS • Effective from 1990, the Consumer Price Index is used a s the basis to calculate State Road Grants so that it takes into account the cost of materials, the cost of labor and the cost of machinery • The State Road grant is paid quarterly NHashim....UPM...12.7.2006

  43. REVENUE GROWTH GRANT • Is given to the State Government whenever there is a growth or increase by more than 10 per cent in the revenue of the Federation in any financial year as compared to the preceding financial year • The rationale given is that the total growth in the Federal Government revenue is the result of growth in States’ contributions • This provision is made in The Revenue Growth Grant (Amendment) Act 1980 NHashim....UPM...12.7.2006

  44. AMOUNT PAYABLE FOR REVENUE GROWTH GRANT • The provision is RM 150 millions to be divided into 2 parts • Part 1 consisting of RM 50 millions of which RM 25 millions to be divided equally between 13 States in Malaysia, & the other RM 25 millions is to be based on the population of each State: NHashim....UPM...12.7.2006

  45. AMOUNT PAYABLE FOR REVENUE GROWTH GRANT • The rates payable are as follows: • The first 500,000 persons get two shares per person, • The next 500,000 persons get one share per person, & • The remainder gets half a share per person. NHashim....UPM...12.7.2006

  46. AMOUNT PAYABLE FOR REVENUE GROWTH GRANT • Part 11 the remaining RM 100,000 million will be so determined by the Federation • This amount will be allocated only after the accounts of all revenues received by the Federation for the preceding financial year have been closed & audited NHashim....UPM...12.7.2006

  47. STATE RESERVE FUND • State Reserve Fund is only given to the States upon application from any particular State • The purpose of this provision is to assist State Governments for the purposes of development in the State or to assist States with deficits in their current accounts NHashim....UPM...12.7.2006

  48. STATE RESERVE FUND • The amount to be contributed into the FUND is determined by the Federal Government after consultation with the National Finance Council • This FUND provides grants based on the economic development, its infrastructures and well-being of each respective States. NHashim....UPM...12.7.2006

  49. ARTICLE 109 (6)(b) OF THE FEDERAL CONSTITUTION • States that: • “The Federation shall pay into the STATE RESERVE FUND in respect of every financial year such sum as the Federal Government may, after consultation with the National Finance Council determine to be necessary; NHashim....UPM...12.7.2006

  50. ARTICLE 109 (6)(b) OF THE FEDERAL CONSTITUTION • ….and the Federation may from time to time, after consultation with the National Finance Council, make the grants out of the State Reserve Fund to any State for the purpose of development or generally to supplement its revenue”. NHashim....UPM...12.7.2006

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